The Foreign Corrupt Practices Act (FCPA) is one of the handfuls of extraterritorial laws that govern
Let me explain.
The FCPA is a criminal law that can only be enforced by the government, typically the Department of Justice and the Securities Exchange Commission. In the Lay-person’s Guide to the FCPA, however, the Department of Justice acknowledges that violations of the FCPA “may also give rise to private causes of action under the Racketeering Influenced and Corrupt Organizations Act (“RICO”) or to actions under federal or state laws” (emphasis added). The “actions under federal or state laws” language leave you open to just about any civil legal theory someone can try to make stick.
Before you blurt out “double jeopardy,” the concept that you can’t be tried twice for the same offense, you need to keep in mind that there can be multiple suits (or causes of action, in legal speak) resulting from the same set of underlying facts. Most common is a federal claim coupled with a state law claim, or a criminal claim coupled with a civil claim (think O.J. Simpson here).
Unfortunately, the financial civil liability exposure can sometimes be greater than the financial criminal exposure. Take for example, the case of Titan, Inc. They made some improper payments to government officials in Africa and Asia and paid the Department of Justice and the Securities and Exchange Commission more than $40 million in fines (attorney’s fees are not included in that number). They then got socked an additional $61.5 million to settle a related shareholder class action suit. Ouch!
Besides shareholder suits, FCPA violators can also face civil action for the FCPA misdeed from competitors who claim that the bribes represent unfair competition that caused them to lose a contract bid as well as other governments who claim they overpaid because the inflated costs charged by the violator included bribery payments to rogue government officials.
The trend toward more parallel civil litigation in connection with FCPA violations has been increasing over the last decade according to one recent report (free registration required). It therefore pays more than ever to follow these four tips for avoiding an FCPA violation:
- Get familiar with the FCPA requirements before doing business abroad
- Establish an effective FCPA compliance program to identify and remedy problems early.
- Maintain accurate books and records to establish financial transparency and maintain business integrity; and
- Get a government reality check if you’re not sure about a proposed course of action because forging ahead and trying to beg forgiveness later could prove to be a frustrating, futile, and more expensive than you ever dreamed.